Ohio’s governor is proposing a tax cut for income tax rates in the state, and compensating increases to the sales tax, in an effort to make Ohio more competitive. The question is whether the cuts are meaningful, or if they are merely a partisan agenda masquerading as a serious policy proposal.
The difficulty for middle- and lower-income individuals is that they already spend virtually all of their income on necessary expenses, meaning they will pay more in taxes under such a plan. According to some analysis, the reduction in income tax will produce little change for the overall income most earners.
One example finds that for a family with two incomes making $60,000 a year, the reduction may only amount to $300 per year, or about the price of a large latte a week at Starbucks. Moreover, some analysis suggests that it could increase the total amount of taxes and other fees many Ohio residents will have to pay.
The governor argues that this will increase Ohio’s competitiveness, but the decision of a company to remain in or move to Ohio is relatively complex. There are questions of transportation, educational levels of the existing workforce, access to higher education, cost of real estate and buildings, locations in relations to your suppliers and your markets and a host of other elements.
A business located in comparatively high tax state like California may be unmoved by a lower tax rate in Ohio, if most of its market is located on the West Coast or an important supplier is nearby.
Businesses may be as concerned about quality of graduates from local schools or the capacity and maintenance condition of important transportation arterials as they are about the tax rate. Because as any business owner knows, if you are not generating any revenue, you are also not generating any taxes.
Because of these complexities, a business should always work with a knowledgeable tax attorney when examining any deal to ensure that any tax impact, whether sales, income, property or any other special taxes are factored into your final numbers and your final decision.
Dispatch.com, “Debate over Ohio’s shift from income tax to sales tax continues,” Jim Siegel, March 1, 2015